A former chief executive of Thomas Cook has insisted his successors were wrong to blame him for racking up the debts that capsized the company, as MPs continued their inquiry into the tour operator’s collapse.
Speaking before the business select committee, Manny Fontenla-Novoa, who presided over the much-criticised 2007 merger with MyTravel and a series of debt-fuelled acquisitions, said: “I just believe on the major decisions I got them right and I’m sorry the way it turned out.”
In the third session of the investigation, MPs heard that:
Accountants managing the liquidation have charged £11m in fees in four weeks.
Hays Travel bought Thomas Cook’s 555 high street shops for just £6m.
Accounting regulators are concerned by company’s use of “goodwill”.
But the committee struggled to extract an admission from its former bosses of the role that they played in one of the most high-profile failures in UK corporate history, prompting the chair, Labour MP Rachel Reeves to say:
“Everybody we’ve seen at Thomas Cook has blamed everybody but themselves. It’s the volcanic ash, it’s the hot weather in the UK, it’s the depreciation of sterling, it’s the debt acquired from someone else.”
“It would be really good to see someone from Thomas Cook say to their customers, suppliers and their employees: ‘We got it wrong.’”
Thomas Cook’s last chief executive Peter Fankhauser, previously told MPs that debts left by his predecessors, which reached £1.2bn by the time of its collapse, prevented him from reviving the 178-year-old tour operator.
In reply on Wednesday, Fontenla-Novoa told MPs: “I can’t accept that. If Peter felt that, maybe they should have done something about that debt and looked at disposing of some assets. Maybe they should have done something about it before 2019.”
Fontenla-Novoa, who earned £17m during his eight years as chief executive, also dismissed suggestions by his immediate successor, Harriet Green, who also gave evidence, that the company had been too wedded to traditional high street travel agencies.
“Even today high street travel agents have an important role to play in the travel business,” he said. “I believe we could have grown. Thomas Cook has shrunk, competitors have grown.”
Green, who took over from Fontenla-Novoa after Thomas Cook’s previous debt crisis in 2011, said she should have moved faster in making the company more internet-focused and reducing the number of bricks-and-mortar stores.
But she indicated that she had been frustrated by the rest of the board, who cut her turnaround plan short and ultimately ousted her as chief executive because it wanted a more “traditional” travel industry figure in charge.
“I should have inputted more in terms of a board that also understood business transformations and how to change business models,” she said.
“Certainly the board and I had disagreements around the level of assets and the rate and pace of a transformation that was changing the DNA of a business.”
Green also dismissed suggestions that she had been overpaid. “It’s on record that I earned less than the previous male CEO or indeed the CEO who came after,” she said.
Dean Beale, the chief executive of the Insolvency Service, which is managing the Thomas Cook’s liquidation told the committee earlier that the accountancy firm KPMG and the consultancy AlixPartners have already been paid £11m for four weeks’ work.
He also disclosed that family-run travel agency Hays Travel, which has vowed to save 2,500 jobs after buying Thomas Cook’s high street shops, paid £6m for them – the equivalent of less than £11,000 a store.
In the three sessions of the inquiry so far, The Conservative MP Antoinette Sandbach has repeatedly suggested that Thomas Cook executives were overly optimistic in accounting for its “goodwill”, the notional value of future income from its businesses.
Elizabeth Barrett of the Financial Reporting Council, which regulates auditors, said an investigation into audit of company accounts by the accountancy firm EY would be considering goodwill accounting.
She said the FRC would examine the “sufficiency of challenge” that EY offered to Thomas Cook bosses’ assumptions about its prospects.
The company wrote down £1.1bn of goodwill associated with the MyTravel brand this year, leading to a £1.5bn loss that Thomas Cook bosses have said contributed to an exodus of customers and helped seal the company’s fate.
Sandbach criticised the former chief financial officer Bill Scott and his predecessors for failing to write down the company’s goodwill earlier.
“At no point between 2012 and 2018 did you consider it appropriate to write down what was a very high level of goodwill. Six months after that, it was written down by £1.1bn,” she said.
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